At a time when there is record demand for affordable homes, Housing Associations (HA’s) are increasingly turning to private landowners to acquire sites for redevelopment, often paying above market value for the privilege.

The shortage of sites suitable for affordable housing is particularly prevalent in inner city areas such as London where many sites are acquired by private development companies who naturally favour high-end luxury developments, which does little to contribute to the number of affordable homes. In a saturated marketplace HA’s face stiff competition for sites and are forced to pay over the odds to secure a suitable site.

The steady rise in property prices together with annual increases in the private rental sector are fuelling greater dependency on affordable homes than ever before. As a result HA’s are struggling to keep up with the demand for affordable homes and are under intense pressure from central government and local authorities to intensify development to ensure a steady supply of social and affordable rented accommodation.

According to DAP managing director Jeremy Stein, the company is “experiencing a significant surge in activity by our housing association clients who are desperate to build more affordable homes”.

He says “HA’s have been forced to rethink their approach to acquisitions. Whereas previously they would appraise the suitability of a site against very narrow criteria, we are now seeing HA’s taking greater risks in acquiring contentious sites as they strive to provide more affordable homes”. HA’s are also entering into more joint ventures with private landowners than ever before as they explore alternative means to bring affordable homes to market.

HA’s finance developments through a combination of government grants and debts secured against future rental income. Unlike private developers, the business model of a Housing Association is primarily concerned with introducing new affordable homes and therefore necessitates development even where it would otherwise be considered commercially unviable.

Opportunity for Landowners

The demand for affordable homes presents a unique opportunity to landowners who engage with HA’s. The benefit to landowners is presented in two main ways:

Firstly, in the case of an outright sale, a HA will typically pay more than a private developer as they operate under a mandate to provide affordable homes rather than returning profit to directors and investors. HA’s are also more likely to purchase property unconditionally, whereas developers usually favour a purchase conditional on the approval of planning permission.

Secondly, in what is arguably an unspoken rule in planning, schemes involving HA’s are considered favourably by local authorities and are more likely to achieve greater density and mass when compared to private developments.

In fact, DAP often advises its private clients to engage with a housing association as a means of unlocking the full potential of a particular site. In such cases, the company facilitates the relationship between the parties and is able to negotiate favourable terms for the landowner. In some cases, entering into a joint venture with a housing association can be especially rewarding for private landowners.

For more information or to explore the possibility of working in conjunction with a housing association, please contact us on 0208 202 3665 or at info@drawingandplanning.com

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